[vc_row][vc_column][vc_single_image image=”9376″ img_size=”full”][vc_column_text]Updated: February 15, 2024
\nPublished: March 25, 2021<\/p>\n
If I think back to my childhood days and recall the shopping experience for <\/span>food & beverage<\/span><\/a> products, my first thoughts are about local grocery stores and smaller neighborhood specialty shops. The massive \u201cbig box\u201d all-in-one stores did not exist. There was no online shopping, and the grocery stores of the day were not much bigger than most standalone pharmacy chain stores are today. There were specialty shops for meat products, produce and bakery items. That was the value chain. It was a relatively simple network that started with the food manufacturer sending products to distribution centers, then on to the grocery stores and specialty shops. Over the last 25 or so years, the <\/span>food & beverage<\/span><\/a> value chain has exploded. From a small selection of sellers of groceries to a variety of options from big box, chain grocery stores, satellite stores, to convenience stores at gas stations and the eCommerce experience.\u00a0<\/span><\/p>\n Is the phrase \u201cgoing shopping\u201d even used anymore? That phrase generated emotions similar to \u201cgoing to work\u201d. Today, going shopping often consists of sitting on a computer screen or looking at a mobile phone and doesn\u2019t involve an actual trip. The evolution of the value chain has been driven by multiple factors; technology, manufacturers and the consumer. The consumer\u2019s impact on the value chain has been huge. The consumer is the \u201cwhy\u201d in why the value chain has expanded. They are the \u201cwhy\u201d in why the big box stores came to be. They are the \u201cwhy\u201d in why grocery stores are now two, three and four times the size of what they were years ago. They are also the \u201cwhy\u201d in why one-stop shopping for most basic consumer goods<\/a> and food can be found under one roof and one computer screen.<\/span><\/p>\n Consumers have become more discerning, more selective, more health conscious and more strapped for time than ever before. The invention and growth of cell phones, computers and IoT technologies were originally supposed to free-up peoples\u2019 time. Instead, the reverse has happened. When people have free time, shopping for the day to day food & consumer necessities frankly, get in the way of doing the things that enhance their life experience. Today, food has become more than a necessity, it is an experience. Manufacturers have had to adjust product offerings to match that mentality. Consumers\u2019 tastes have changed. They don\u2019t want to choose between a cheese or pepperoni pizza. They want thick crust, thin crust, deep dish, supreme, veggie, or nowadays a pizza with no dough at all but one made from cauliflower or another plant-based alternative. <\/span>Consumers are driving what products food & beverage manufacturers make<\/span><\/a> and where they\u2019re purchased. And most importantly, the consumers are changing their minds faster than the industry can respond.<\/span><\/p>\n The movement to healthier lifestyles is not new. Consumers have engaged in fad diets and weight loss gimmicks while indulging in the same foods that put them on an unhealthy track to start. Now those same consumers are looking for different products to move to that healthier lifestyle while satisfying cravings and tastes, only buying from manufacturers and retailers who provide the products that meet their needs. This trend has forced manufacturers to make a number of changes to their products and business processes. For example, the ingredients used in products today are different from those in the past. The movement has been to more natural products and thus changes to ingredients.<\/span><\/p>\n While consumers do want healthier products, they also want them to be ready to eat, quick to prepare and to be able to consume them on the go. That is one reason why the value chain has expanded to high end convenience stores located at places that provide other services such as gas stations. This increase in healthier products has significantly changed what the manufacturer produces, increases the number of SKUs they produce, and shortens product life cycles. In addition, they need to ensure distribution of these products to more locations, which complicates the supply chain.<\/span><\/p>\n Consumers have shown they are willing to pay more for products that meet their lifestyle needs; however, they are still looking for value without skimping on quality. This has forced manufacturers and retailers alike to become more creative. Consumers will purchase store branded or private label products if they can get similar quality and taste for a lower price. Store brands have always appealed to discount shoppers and those on a budget, but now the general consumer is looking to save on food bills and have disposable income for other things. Private labels and store brands are one way to achieve this goal. This puts pressure on the brand manufacturer to be creative and innovative to keep the consumer loyal to the branded products. Promotions are the key. Discounts and Buy One, Get One deals sometimes do the trick, but things have gotten so competitive that new tricks are required.<\/span><\/p>\n A current trend is the running of joint promotions between companies that are not financially linked but produce products that pair well together. For example, a dairy company and a bakery company teaming together for a promotion where the dairy company puts a coupon on a gallon of milk offering a discount for a package of cookies from a bakery manufacturing company. In turn, the cookie company offers a discount coupon for the gallon of milk from the dairy. It is an interesting concept that shows innovation to sell more products and stay ahead of the competition. This, however, is very difficult to manage between companies both jointly and internally. It requires sophisticated systems and communications not just between the companies involved but between the retail partners as well.<\/span><\/p>\n One of the major consumer driven trends has been focused around food safety, quality and the <\/span>sustainability<\/span><\/a> movement. Globally, regulations are continually changing and getting stricter for food safety. The ability to track and trace food & beverage products through the entire supply chain is now being driven by the consumer. They want to <\/span>know the origin<\/span><\/a> of all products back to the field where the ingredients are grown and the facilities that produce the supporting materials and <\/span>packaging supplies<\/span><\/a>. The Food Safety Modernization Act in the United States focuses on prevention of incidents rather than the reaction to food safety breaches. The consumer movement is in parallel to that piece of legislation. Consumers are changing their buying habits and beginning to buy products only from manufacturers that offer full traceability and those who are clearly operating with a sustainable footprint.<\/span><\/p>\n In the spirit of the Amazon effect, consumers in recent times have turned their attention to food & beverage products not just to buy online but to receive the same or next day. According to <\/span>Digital Commerce 360<\/span><\/i><\/a>, by the middle of 2020, 31% of U.S. Households had used an online food buying service. In total, online food buying has increased by more than 143% since 2019. The numbers have grown internationally as well. Obviously, the pandemic has accelerated the need for online food buying and the consumers desire to do so. However, this trend began prior to the outbreak of COVID-19. Whatever the reason, the surge in online food buying has changed the manufacturing industry as well as the food & beverage value chain and supply chain.<\/span><\/p>\n Manufacturers\u2019 communication with retailers, distributors and ecommerce services has needed to not only improve but in many cases develop. Some manufacturers are looking to start their own ecommerce business in order to remove the middle man. In terms of next day delivery, it is difficult to supply a consumer in Florida a food product tomorrow produced in the middle of Kansas if that is their only facility. Manufacturers need to have distribution facilities now spread out throughout the country either on their own or through third party logistics providers. From the manufacturing point of view, the contract manufacturing (Co-Packing) industry has seen increases in volume as it is easier and cheaper for manufacturers to have a co-packing network set up to avoid the need for company owned manufacturing facilities. This trend is also happening in the UK, Europe, Australia and New Zealand. Consumers have turned the retail food industry upside down similar to the rest of the CPG market through ecommerce. In turn, manufacturers have had to seriously adapt.<\/span><\/p>\n We always focus on companies that manufacture products as manufacturers. Food & beverage producers are no different. However, as these consumer trends impact the food & beverage value chain, supply chain and the actual manufacturing operations of this industry, we need to look at this from another angle. These companies are sellers as well. Yes, consumers typically do not buy the finished products from the manufacturer themselves, although this is changing too. Products are sold through distribution and retailer partners who then sell to the consumers. This has complicated the entire process and the supply chain. Forecasting product demand has gotten more complex and tougher to do. This ripples through the entire process as it alters manufacturing operations and the supply and procurement of ingredients. One thing for certain is that manufacturers need to <\/span>adapt to these changes<\/span><\/a> if they want to compete in the future.<\/span><\/p>\nConsumers\u2019 Growing Impact on the Food & Beverage Value Chain<\/span><\/h2>\n
Healthier but Quick and To-Go<\/span><\/h2>\n
Quality but at a Value<\/span><\/h2>\n
Food Safety, Traceability and Sustainability<\/span><\/h2>\n
Online Food Purchasing and Next Day Delivery<\/span><\/h2>\n
Impact on Food Manufacturers<\/span><\/h2>\n